THE economy is moving in the right direction, says the State Bank of Pakistan in its quarterly report. There can be a lot of cheap populism on this front, with sensationalist pressure groups having photo-ops with this unemployed young man and that impoverished family. There can also be not-so-cheap-but-cheap-nonetheless populism reminding everyone of the fact that the economy, by the central bank's own admission, is not going to grow by the target of 5.5 percent but by something between 2.5 and 3.5 percent. The SBP, however, has a whopper of a defence: the global financial recession. Though its use as a one-size-fits-all cover for all bits of financial mismanagement should be discouraged, the fact of the matter is that there has been a general slowdown in the great machine of the global economy. And all estimates of how much the economy is set to grow are a function, amongst other things, of the level of military conflict within the country. That can be horribly difficult for the planners to model accurately. Inflation, which was on everybody's minds of late, has been curtailed. This has been possible due to a combination of strict monetary policy and greater fiscal discipline. As opposed to what was being circulated in certain sections of the popular press and the airwaves, we did not, in fact, face the problem of falling aggregate demand but quite the opposite. It was this structural imbalance in the grand square-off between aggregate demand and aggregate supply that was causing the price hike. It was not, however, just this; there was the excess liquidity in the money markets, still sloshing around after the reckless years of the Shaukat Aziz era. The increased interest rates were meant to achieve just that. This led to a lot of resentment, understandably, from the business community but it was necessary for curtailing inflation, which apparently, it has to a certain degree. But the choking off of interest rates makes credit provision sparser, raising the costs of doing business in the country. How are we to deal with healing the supply side without that? That is a trade-off, one of the many one face in the dismal science. Imports, however, seem to be falling, if only in the relative sense. The narrowing trade deficit obviously then lowers the current account deficit, if not the fiscal deficit (which is not directly related to the general import behaviour). It also builds up foreign exchange reserves. That, in turn, is bound to lead to a measure of stability in the Pakistani rupee. The need of the hour is to spur up growth without leading to an overheated money market and to ensure that this growth occurs in sectors that yield the most jobs. It is job creation and sustainable development that can lead to the sort of growth we need in the current precarious global financial situation.